The World's Best Dividend Portfolio

In June, I invested my money equally in a selection of 10 high-yield dividend stocks. Those names offer triple the yield of the average S&P 500 stock. You can read all the details. Now let's check out the results so far.

Company

Cost Basis

Shares

Yield

Total Value

Return

Southern $39.71 25.0818 4.1% $1,168.56 17.3%
Exelon $41.82 23.818 4.8% $1,041.08 4.5%
National Grid $48.90 20.3693 5.8% $990.15 (0.6%)
Philip Morris International (NYSE: PM  ) $68.49 14.5429 3.9% $1,150.34 15.5%
Annaly Capital (NYSE: NLY  ) $18.24 65.5 14.2% $1,053.24 (10.3%)
Frontier Communications (NYSE: FTR  ) $7.88 126.4243 15.6% $633.39 (36.4%)
Plum Creek Timber $38.42 26 4.6% $963.30 (3.6%)
Brookfield Infrastructure Partners $26.12 38.2825 5.1% $1,063.49 6.4%
Vodafone (Nasdaq: VOD  ) $26.52 37.5566 5% $1,041.82 4.6%
Seaspan (NYSE: SSW  ) $14.61 69 5.5% $939.09 (6.8%)
Cash       $74.97  
Dividends Receivable       $90.63  
Total Portfolio       $10,172.73 0.5%
Investment in SPY
(Including Dividends)
        (0.8%)
Relative Performance
(Percentage Points)
        1.3

Source: S&P Capital IQ.

Our total portfolio performance has broken into the positive since inception, moving from -0.6% last week to 0.5% this week. We even increased our outperformance, to 1.3 percentage points above the S&P, and we did so with less volatility. I'm confident in the long-run nature of this portfolio, and I fully expect it to outperform. Even if our capital goes down in the interim, we'll still see dividends while we wait (including that luscious payout from Annaly, which just went ex-div). We have six stocks outperforming the index.

With more than $160 in cash that should be in the portfolio by the start of February, it's not too early to consider what we might buy. Thanks for all your suggestions so far. And remember, I'm reinvesting only in what's in the portfolio so far. So, Fools, what should I buy?

At the end of one year from inception (about June 2012), I'll consider whether I might add or rearrange the portfolio. As a head start, here's a stock I'll strongly consider adding: what I call The Dividend-Paying 2-Bagger.

As we head into a tenuous and uncertain 2012, I'm glad to be in dividend stocks because of their lower downside volatility. We should still see good performance from mortgage REITs, including Annaly, which thrive in poor conditions. You can see my latest thoughts on Annaly and explore 2011's Top 10 Mortgage REITs. If we could only get a little cooperation from Frontier, we'd be smoking the S&P.

I hope you've enjoyed following along with me and the world's best dividend portfolio in 2011. Thank you, and here's to a prosperous new year and an even better 2012!

Dividends and other announcements
Going into the holiday season, the news has been pretty light. We had an interesting development from Seaspan earlier this month and these bits of dividend news:

  • Seaspan announced a big repurchase authorization, up to 10 million shares, or 15% of shares outstanding, in a tender offer. The shocker was the 43% premium the company was willing to pay over Monday's closing price. Shareholders can tender their shares for $15 by Jan. 11. The company also said it will spend $54 million in stock to buy its management company, helping to eliminate conflicts of interest. That tender probably means another dividend raise is off the table for a few quarters yet.

Dividend news:

  • Vodafone announced a special dividend of 4 pence on top of its 3.05 pence interim payout. The stock traded ex-div on Nov. 16, and the money will be paid out on Feb. 3. In dollars, the total payout comes to about $1.12 per U.S. share at current exchange rates.
  • Frontier went ex-div on Dec. 7 and paid out $0.1875 per share on Dec. 29.
  • Philip Morris went ex-div on Dec. 20 and pays out $0.77 a share on Jan. 10.
  • Annaly went ex-dividend on Dec. 27 and pays out $0.57 per share on Jan. 26.

All that, of course, means more money coming into our pockets shortly and more money to reinvest.

It's fun to sit back and get paid, and with the market volatility, we might have a good chance to reinvest those dividends at good prices. Europe continues to be an absolute mess, and continued bad news will probably have stocks plunging again. If they do, I'll be inclined to pick more shares up.

Foolish bottom line
I've been a fan of big dividends for a while, and I think this portfolio will outperform the market over time through the power of dividends. As I promised in the original article, I'll be holding these stocks for at least a year and will continue to track the portfolio over the course of the year, including news on these companies.

If you like dividends, consider these 10 tickers along with the 11 names from a brand-new free report from The Motley Fool's expert analysts called "Secure Your Future With 11 Rock-Solid Dividend Stocks." Today I invite you to download it at no cost to you. To get instant access to the names of these 11 high-yielders -- it's free.

Jim Royal, Ph.D., owns shares of the 10 portfolio stocks mentioned in the table. The Motley Fool owns shares of Seaspan, Brookfield Infrastructure, Annaly, Plum Creek, and Philip Morris and has created a covered strangle position on Plum Creek. Motley Fool newsletter services have recommended buying shares of Exelon, National Grid, Philip Morris, Vodafone, Southern, and Brookfield Infrastructure, as well as writing a covered straddle position in Seaspan and a covered strangle position in Exelon. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 02, 2012, at 5:25 PM, omni7 wrote:

    I'm following you here Jim, and being a bit prejudice perhaps, I would take my proceeds and buy more PM, on a dip if possible. I hold the company myself and believe they are going higher, in time. Of course, some of your other holdings have dipped significantly. If you believe in one of them, make the investment and try to reap the rewards. Sometimes investing is about faith too, faith in your own choices, in your own research.

    Good luck and Happy New Year to you and yours!

  • Report this Comment On January 03, 2012, at 4:26 PM, jm7700229 wrote:

    I managed to buy SSW at its yearly high, and have been tempted by the $15/ share ($4.38/ share loss) offered in the tender. Still:

    1. management and directors have chosen not to tender their shares.

    2. the premium suggests management feels the stock to be severely undervalued.

    3. I only put in half of my year's Roth contribution, so my exposure is slight.

    I think I'm going to bump up my holding a bit.

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